As with so many things in the US it varies by state, it’s not (apparently) a Federal statute. See here. Airlines making it a rule probably makes it more convenient for them, and eliminates the risk of accidentally breaking a state law.
Only Alabama and Alaska make it a firm law, five others require it when moving a body by “common carrier”. It is not always required, depending on state(s) and transport. If I recall correctly, the chief pilot in this accident was not embalmed when transported for a funeral on a private airplane between Kentucky and Indiana.. After a Hindu funeral he was cremated and his ashes taken back to India by his parents. So it’s not always required, but likely with commercial carriers often required.
People probably don’t want to know how often there are deceased passengers in the cargo hold of passenger airlines. It’s not like the folks downstairs would be making a lot of noise, right?